ATM terminals are very widely used, and allow users to withdraw cash and to perform other banking transactions. Usually, in order to withdraw cash a user inserts a financial transaction card, for example a credit or debit card, into an ATM terminal, enters a PIN code, and performs transactions via a sequence of screens displayed on the terminal.
As ATM terminals contain large quantities of cash, they usually include various security mechanisms to discourage theft. For example, ATM terminals are usually constructed to be physically strong and heavy to make removal, or breaking open, of the ATM difficult. More sophisticated, anti-tampering mechanisms are also usually provided to ensure that any tampering with the ATM is detected and may cause shut down of the ATM or generation of an alarm. Many ATMs are embedded within the fabric of a building, for example embedded in an external wall, in order to discourage theft.
ATM terminals are relatively rare in developing countries, and in rural or isolated regions of many developed countries. That is partly because of the difficulty in installing relatively large, heavy and sophisticated ATM terminals and because of the possible lack of suitable technical infrastructure, and also because of the high cost of standard ATM terminals.
Bank agent networks have been developed in some countries, particularly in isolated regions. Bank agent networks are particularly popular in some Latin American countries, for example Brazil and Peru. Bank agents are local entities, often shops and post offices, that are contracted by a financial institution such as a bank to offer certain banking services on behalf of the bank. For example the agent may conduct a banking transaction, such as withdrawal of cash by a user, on behalf of the financial institution. The bank agent has to enter into a contractual relationship with a bank, and usually has to open a dedicated bank agent account with the financial institution. There are often strict requirements for the bank agent to maintain a threshold amount of working capital to underwrite its activities, and the bank agent may be subject to rigorous checks and ongoing scrutiny by the financial institution. However, the day-to-day activities of the bank agent are largely out of the control of the financial institution and the financial institution must rely on the integrity of, and the administrative arrangements used by, the agent.
Cash withdrawal transactions performed by the bank agent to allow a user to withdraw cash from the user's account may be in the form of point-of-sale (POS) transactions. POS transactions are also very widely used throughout the world by non-banking agent retailers to enable customers to purchase products and also, in some cases, to allow customers to withdraw cash as part of a transaction process with the retailer. For example, supermarket customers in the UK often obtain cash-back when paying for goods purchased at a supermarket. In such cash-back or other POS transactions, cash is passed from the supermarket or other retailer to the customer, and the customer's account is debited by an amount equal to the sum of the purchase price of the goods and the amount of the cash-back transaction. The supermarket's, or other retailer's, account is credited in the amount of the cash-back transaction.
There are significant differences between POS transactions and ATM transactions, for example in relation to the charging and distribution of interchange fees.
In the case of a POS transaction, the card issuing bank deducts the interchange fee from the amount it pays the acquiring bank that handles a credit or debit card transaction for a merchant. The acquiring bank then pays the merchant the amount of the transaction minus both the interchange fee and an additional smaller fee.
In contrast, for cash withdrawal transactions ATM fees are paid by the card issuing bank to the acquiring bank.
Furthermore, ATM and POS transactions usually use entirely different protocols for communication and control. The ATM protocol that is used for control of a particular ATM terminal and for sending messages to a server and/or financial institution network may be manufacturer-specific and country-specific. For example, NDC and D912 are ATM protocols that are often used in countries in which NCR and Diebold ATM terminals respectively predominate, for example UK, US, Russia, Eastern Europe, India and some other Asian countries. Many European countries do not use NDC or D912, but have their own national ATM protocols or may use other vendor-specific protocols. Despite the differences between ATM protocols they usually have a core functionality that is similar, and that is distinct from protocols used for POS transactions. For example, ATM protocols provide for reversal operations allowing a transaction to be reversed but, unlike POS protocols, do not allow for refund operations. Furthermore, ATM protocols are usually used to manage the ATM terminal hardware as well as providing for communication, for example an ATM protocol may track cash levels, track performance of components of the ATM terminal and may be used to update or otherwise modify ATM terminal software or reconfigure the ATM terminal.